FDI dips by 45% in first five months of FY 2016-17

[Great Sachin]

It is perhaps the country is running out of opportunities to invest..and more opportunities will only pop up after CPEC competition when industrial and manufacturing facilities gain traction..

China is owning all the earning of CPEC for next 40 years...How pakistan gonna make money for these many years

 

[Dzz]

Unsustainable bubble economy will raise & fall nothing todo be surprised really.it is a very common occurrence in most developing countries.

 

[PAKISTANFOREVER]

Unsustainable bubble economy will raise & fall nothing todo be surprised really.it is a very common occurrence in most developing countries.

When it happens then we'll take. Till then your comments are simply indian hyperbole from the same school of indian delusional thought that claimed Pakistan would NEVER EVER become a nuclear weapons state with or without Chinese assistance.

 

[Peshwa]

Chanel 4 news (UK TV) May 1998, a week before Pakistan tested it's devices. An indian military official and politician made direct threats to Pakistan and were both highly doubtful of Pakistan's capability. They both declared that they should "teach Pakistan a lesson". They were very confident.

I'm sorry, but your claim seems to be pulled straight out of thin air. You have no links to back up your statement nor a video to corroborate the same.
India has been well aware of the Pak nuclear program since the 80s with rumored speculations of Israel and india collaborating on strikes against Pak nuclear facilities.

You have used this same exact argument about "no one thought we could make the bomb and we did it" so everything Pak now claims is possible because of precedent. This is obviously not true. Intelligence agencies make it their bread and butter to scout such info and the world knew exactly what capabilities Pak had and where the nukes came from!

Sorry but in the future, please refrain from making claims you can't back up.

 

[SQ8]

Keep Indian economy out of this thread. Whether to needless throw trash at it or Indians sucking their own. Focus on Pakistan.

 

[PAKISTANFOREVER]

I'm sorry, but your claim seems to be pulled straight out of thin air. You have no links to back up your statement nor a video to corroborate the same.
India has been well aware of the Pak nuclear program since the 80s with rumored speculations of Israel and india collaborating on strikes against Pak nuclear facilities.

You have used this same exact argument about "no one thought we could make the bomb and we did it" so everything Pak now claims is possible because of precedent. This is obviously not true. Intelligence agencies make it their bread and butter to scout such info and the world knew exactly what capabilities Pak had and where the nukes came from!

Sorry but in the future, please refrain from making claims you can't back up.

I may not have the source but I quite clearly remember the claims indians were making and mocking those who thought it was possible for PAKISTAN to produce nuclear weapons. I was doing my A-Level at the time. The elite of the indian military high command may have known but other indians didn't. I remember the shock of the indian politicians and the table banging by them in the indian Parliament when the news arose that Pakistan had successfully tested it's nukes.

I think George fernandes the indian defence minister said that India should "teach Pakistan" a lesson as india is now the superpower of south Asia because of it's nuke capability wheras there is no confirmation of Pakistan's nukes capability.

Keep Indian economy out of this thread. Whether to needless throw trash at it or Indians sucking their own. Focus on Pakistan.

Apologies. Will do.

 

[LA se Karachi]

VERY VERY IMPRESSIVE. Afterall Pakistan is most veraciously growing Economy is South Asia infect in the World with most impressive data.

I didn't say it was. I was just clearing up some misconceptions about Pakistan's economy for your factually-challenged compatriot. Don't twist my words.

 

[My-Analogous]

It seems that the world is not endorsing the government of Pakistan's claims about its rapid growth as the foreign direct investment (FDI) in first five months of current fiscal fell drastically by 45 percent.

The country, which attracted FDI worth $839.7million in July-November period of fiscal year 2015-16, recorded 45.2 percent decline during the first five months of the current fiscal at $459.8 million.

In November 2016, FDI fell by 37.30 percent to $143.7 million, from $229.2 million recorded a year ago in same month, according to the latest data from the State Bank of Pakistan (SBP).

The SBP's data on FDI showed that portfolio investment recorded impressive growth in first five months of FY17 to negative $95.1 million from negative $192.4 million in same period of FY16. Analysts said the heightened concern about the impending interest rate hike in the US has prompted most investors to shift their funds away from emerging market economies including the Pakistan. Ahsan Mehanti, analyst at Arif Habib Corp, said, "US presidential election has impacted overall global FDI scenario, while following the Trump's victory, prospects of investment in emerging markets have been faded as rising FDI outflow from emerging markets is not favouring Pakistan also."

He said persistent political uncertainty in Pakistan was another main reason of declining FDI. The present regime's success has not been measured because the government stay focused only on the CPEC projects during three years. "Despite the fact that FDI numbers are expected to improve in near future due to heavy investment under CPEC, government should appoint foreign minister in order to pave the way for other international investment', he added.

"The tenure of Pakistan People's Party (PPP) was much better than current rulers as current average of FDI in three years was below from the FDI average in the PPP led government's era," senior economist Dr Shahid Hasan Siddiqui said.

Despite repeated claims of the government regarding country's growth and acknowledgment by International Monetary Fund (IMF), FDI remained on slowest ever trajectory in recent times which clearly shows that the word is not accepting the false claim, he added.

The figures being quoted by finance ministry are stage-managed as Senate Committee has been termed tax revenues and budget deficit improvement manipulated already, while government's claims about massive increase in foreign reserves are also wrong, since $13 billion increase in foreign reserves is actually $13 billion external debts, Siddiqui claimed.

In nutshell, our macroeconomic indicators are not impressive, while local investors are hesitant to invest in their own country and Pakistan ranked lowest in global competitive index in south Asian region which has translated in to no FDI at all, added Siddiqui.

One of the sectors in which the country saw a major decline in investments was power with total FDI of $142.5 million in the July-November period, compared to $394.4 million in the same period of last year.

Communication (information technology, telecommunication) was another sector that saw a major shift where the FDI stood at was negative $10 million net FDI in the period under review, compared to $73.3 million net FDI in the corresponding period of last year. Automobile equipments' FDI declined from $18.9 million in first five months of FY16 to 14.7 million net FDI in same period of current fiscal. Saudi Arabia remained the major country that pulled out 51 percent of its investments in Pakistan during the period under review.

http://dailytimes.com.pk/business/16-Dec-16/fdi-dips-by-45-in-first-five-months-of-fy-2016-17

Ask IK to stop dharna, which he did in every four months, without political stability country will not progress and this idiot is hurting Pakistan more then corruption, he made a culture that for many coming Govt's this same drama's will happened. Election i near but he is still doing drama, what if next Govt. is from IK and all parties doing same drama of IK in every 3 to 4 months?. IK is unfit to be head of state in terms of managements and i can prove it by so many previous events he did

CPEC is a necessity for Chinese (not economically because Sea route is economically viable) but strategically.. Because Sea trade through Malacca straight is vulnerable for a blockade by Japan or USA in an event of conflict.. China is spending billions for strategic expansions ( be it artificial islands or pipeline through Myanmar etc.)
Pakistan also benefitted lot from this project ,no doubt.. But lack of negotiation took away many benefits.. If you think China is generous and took risk in investing Pakistan, actually not that much..
China is giving loans not aid.. The interest or extra rates are so high.. Especially for power projects.. Upfront tariff is already as high in the range of 8-10 cents for coal plants( it was only 4-5 cents in 2014, every two years upfront tariffs revised).. Also every projects are insured by sino sure because of high risk of investment.. For example For instance, the capital cost of a 660MW project at Port Qasim is $767.9m. But it goes up to $956.1m by adding Sinosure’s fee of $63.9m, its financing fee and charges of $21m, and interest during construction of $72.8m; a 27.2pc return on equity is guaranteed( from dawn).. Your govt also gives sovereign guarantee to Chinese companies.. These projects are also free from the risk of circular debt.. This means GoP took full risk of Chinese investments.. Now about infrastructure.. Chinese share in infraprojects are only $3 billion( $9billion invested by GoP by the imf, adb etc loans)..These are also loans.. But Chinese benefitted more.. They can use Gwadar port & these roads for free for 40 years..
Now about FDI.. If these infrastructure & power projects are carried out by GoP by Chinese loans, that will benefits you people.. But actually here what is happening?? Chinese banks directly gives finance to Chinese firms.. All machineries ,technology, skilled labours( also unskilled ), raw materials everything is imported from China.. Note that these imports are tax free.. About 9000 Chinese working here.. These money flow back to China.. Actually it is Pak money.. The surprise is full transaction including labour cost is in dollar.. Actually FDI not work like that.. Investments comes in dollars.. Central bank will buy that & give local currency in return.. As a result local currency will strengthened.. Market liquidity will increase.. Companies uses this local currency as capital..
The remaining hope is investments after completing the projects.. Need that much demand for this high cost surplus electricity..It needs massive foreign investments for repayments of this debts.. If something got wrong, Pakistan will become bankrupt to Chinese..

Since CPEC is now operational, let me give you small hint, by 2020 Chinese economy will hit 1 to 1.5 T Dollar because of CPEC and we are expecting 8 to 20 billion dollars per year in term to tax from this route. So calculate in how many years we can repay loans? i can say easily within ten years. Regarding advantage taking from China, yes we already did that to and when time come you all will know

 

[Jugger]

This is actually a normal trend in Pakistan and probably countries around the world. Yearly growth is much more important.

Yep this is normal indeed in Paksitan.
There is a saying, people born in fire are not afraid of the sun.
FDI will increase if the security and stability of Pakistan increases.

 

[LA se Karachi]

CPEC is a necessity for Chinese (not economically because Sea route is economically viable) but strategically.. Because Sea trade through Malacca straight is vulnerable for a blockade by Japan or USA in an event of conflict..

Western China is closer to Pakistan/Gwadar than to China's eastern shore. China also plans to enhance trade with Pakistan. As growth in China shifts westward, CPEC will become even more important. Central Asians countries will use Gwadar too. In any case, CPEC is mostly energy projects, which are critical for Pakistan:

Pakistan also benefitted lot from this project ,no doubt.. But lack of negotiation took away many benefits.. If you think China is generous and took risk in investing Pakistan, actually not that much..
China is giving loans not aid.. The interest or extra rates are so high.. Especially for power projects..

They did negotiate. Some loans have been cut, others have been turned into 0% interest loans, and one essential project has even been turned into a grant.

"In a major development, China has converted the $230 million loan for the construction of the Gwadar airport into grants, which is scheduled to be completed by December 2017, The News has learnt.

Beijing has also converted $140 million loan for the construction of Eastbay Expressway Project for Gwadar city as interest-free and will get back only the principal loan amount from Islamabad."

https://www.geo.tv/latest/6270-china-converts-230m-loan-for-gwadar-airport-into-grant

But the bottom line is, you have to have leverage to negotiate. Pakistan had very little. CPEC benefits primarily Pakistan, not China. Yet, it still found away to get major concessions from China, despite this. And no, the interest rates are not "so high". That's just a false talking point repeated over and over by some Indians. Most of them are below market rates.

“Out of the overall cost of $3.8 billion for infrastructure projects including Gwadar airport, construction of the Lahore-Karachi motorway section from Multan to Sukkur and other projects, the interest payment on Chinese loan was slashed down from over 3 percent to just 1.6 percent,” official sources in the Economic Affairs Division confirmed..."

https://www.thenews.com.pk/print/14833-china-converts-230m-loan-for-gwadar-airport-into-grant

Especially for power projects.. Upfront tariff is already as high in the range of 8-10 cents for coal plants( it was only 4-5 cents in 2014, every two years upfront tariffs revised)..

It is indeed 8-10 cents, which is much cheaper than the current average rate of 14 cents.

"First is the affordability challenge. Thanks to poor planning and governance, Pakistan generates very expensive electricity. The cost per unit kilowatt-hour (kWh) of generated electricity in Pakistan is around 14 cents (14 Rupees). Consumers, on average, pay 11.50 Rupees per kWh. The systematic subsidy, which is almost 15 per cent of the cost, adds up to billions in losses.

http://www.dawn.com/news/1195871

Also every projects are insured by sino sure because of high risk of investment.. For example For instance, the capital cost of a 660MW project at Port Qasim is $767.9m. But it goes up to $956.1m by adding Sinosure’s fee of $63.9m, its financing fee and charges of $21m, and interest during construction of $72.8m; a 27.2pc return on equity is guaranteed( from dawn).. Your govt also gives sovereign guarantee to Chinese companies.. These projects are also free from the risk of circular debt.. This means GoP took full risk of Chinese investments.. Now about infrastructure.. Chinese share in infraprojects are only $3 billion( $9billion invested by GoP by the imf, adb etc loans)..These are also loans.. But Chinese benefitted more...

This part of your post is very difficult to parse. Please break it down into paragraphs and provide links to some sources next time.

The energy projects of CPEC are a mix of Chinese and Pakistani firms (not just Chinese), and the loans don't have a high interest rate.

"$15.5 billion worth of energy projects are to be constructed by joint Chinese-Pakistani firms, rather than by the governments of either China or Pakistan. The Exim Bank of China will finance those investments at 5–6% interest rates"

http://www.fwo.com.pk/news-info/latest-news/430-cpec-special-report-in-shanghai-business-review

They can use Gwadar port & these roads for free for 40 years..

No they can't. Another false talking point. While they will be exempted from most taxes at Gwadar, they will still have to pay transit fees.

Note that these imports are tax free.. About 9000 Chinese working here.. These money flow back to China.. Actually it is Pak money.. The surprise is full transaction including labour cost is in dollar.. Actually FDI not work like that.. Investments comes in dollars.. Central bank will buy that & give local currency in return.. As a result local currency will strengthened.. Market liquidity will increase.. Companies uses this local currency as capital..

Most of the labor being supplied is local. Obviously, there are some Chinese workers there as well because Chinese companies are working on the projects.

The remaining hope is investments after completing the projects.. Need that much demand for this high cost surplus electricity..It needs massive foreign investments for repayments of this debts..

Surplus electricity?! Lol, what universe are you living in? There is enormous demand for it. Pakistan faces huge energy shortfalls that are costing it economic growth. This is the main purpose of CPEC.

"The demand for electricity has continued to out-pace the growth rate of the economy. A power shortage (first) appeared in 2006, which at times crossed 5,000 MW. This resulted in severe load shedding, with urban areas experiencing brown-outs for 8-12 hours each day. At that time, small cities and rural areas often experienced up to 18 hours of load shedding every day. Furthermore, even industries with dedicated supply arrangements often experienced a suspension of gas supplies up to 4 days every week during the winter months.


The shortfall in electricity has led to drastic measures, where markets are required to close early, and organisations are required to take a two-day weekend. These measures have effectively reduced the productive working time and shortened the social life of people.


An increase in electricity demand is directly linked to the growth of the country’s economy. With anticipatory growth in all sectors of the economy, it is expected that the demand for electricity will likely rise substantially in the coming years."

http://www.hawa-energy.com/energy-in-pakistan/power-deficit-in-pakistan/


It is estimated to cost Pakistan 2-2.5% growth a year:

"In recent years, by some estimates, Pakistan’s energy crisis has cost its economy 2% to 2.5% of GDP annually"

http://blogs.wsj.com/washwire/2015/07/09/pakistans-other-national-struggle-its-energy-crisis/
https://www.wilsoncenter.org/publication/pakistans-interminable-energy-crisis-there-any-way-out

It needs massive foreign investments for repayments of this debts.. If something got wrong, Pakistan will become bankrupt to Chinese..

No, it just needs to be able to provide electricity to its people, and to get rid of the subsidies. It will be able to repay the loans easily, if so. With CPEC, it should be able to do that. Energy projects are among the most reliable investments to boost economic growth (and generate revenue), especially considering the shortfall of supply in Pakistan and its ever increasing demand.

I'm afraid that most of the points you've made aren't true. Clearly, some CPEC-obsessed Indians have a narrative in their mind: "CPEC loan interest rates are too high, there are few benefits for Pakistan, China is colonizing it", etc. But the facts are different. And in any case, China has foreign exchange reserves that total over $3 trillion. $46-55 billion is a relatively small amount to it. China is not going to push one of its closest allies over this amount. It's a part of CPEC for its own benefit.

Pakistan has a lot to gain from CPEC, but not a lot to lose.

 

[Peshwa]

First and foremost, It is absolutely imperative to provide a link or source to substantiate your claim, else this all is simply a figment of your imagination. I'm going to be blunt and say that my feeling is that you're straight up making this up.
I did a google search on this and literally no results have shown up.

On the other hand, please see below for the link which clearly mentions that the Indian authorities were well aware of Pakistani plans on making a bomb.

Some information about India's efforts to make thermonuclear weapons has been discovered over the years by various members of the intelligence community. For instance, a 1985 West German intelligence document cited one agent's unconfirmed report that the "leadership of [Bhabha] had been given the assignment by the Indian Defense Department, after consultations with the highest cabinet officials and Prime Minister [Rajiv] Gandhi, to continue working on the development of a nuclear fusion weapon (hydrogen bomb)." According to this report, Bhabha's job was to be sure that "within two months of a Pakistani test, the second Indian test could be carried out. Such an Indian test should simultaneously be used for the development of a fusion explosion."

http://isis-online.org/uploads/isis-reports/documents/Albright1998Shots.pdf

I may not have the source but I quite clearly remember the claims indians were making and mocking those who thought it was possible for PAKISTAN to produce nuclear weapons. I was doing my A-Level at the time. The elite of the indian military high command may have known but other indians didn't. I remember the shock of the indian politicians and the table banging by them in the indian Parliament when the news arose that Pakistan had successfully tested it's nukes.

Absolutely no proof of this!
The Indian parliament is filmed when in session. So any such outrageous outbursts would have made at least headlines, if not made its rounds of you tube. But none such exist. So I'm going to have to ask you to stop making this up.

I think George fernandes the indian defence minister said that India should "teach Pakistan" a lesson as india is now the superpower of south Asia because of it's nuke capability wheras there is no confirmation of Pakistan's nukes capability.
.

Total Tripe!
If Fernandez said this, it will be on record and will make headlines. Please corroborate with evidence.

 

[Clutch]

Don't panic: FDI are up....



A shaky investment outlook will continue to pose a challenge to economic policymakers as well as the country’s economic prospects during 2017, in spite of signs of improvement in the fundamentals.

Indeed, foreign investors have begun returning to Pakistan as security conditions across the country, particularly in Karachi, improve on the back of the military led operation and the China Pakistan Economic Corridor (CPEC) project gets under way.

With Chinese firms buying major stakes in Karachi Electric (KE) and the Pakistan Stock Exchange (PSX), a Turkish investor acquiring Dawlance and Europeans taking over Engro Foods, the ‘investor confidence’ appears to be surging over the last few months.

“After a lull of 6-7 years, FDI is picking up. Indeed, the CPEC has helped. But I think even without it our perception has improved”
The recent changes in the top military command amidst reports of growing tensions between the civilian authority and the armed forces under its previous chief, Gen Raheel Sharif, too has raised hope of political stability and an end to uncertainty and turbulence from the country.

But local investors largely refuse to follow the lead of foreign investors and still remain hesitant about committing their money to the industry in spite of historically low interest rates and improved energy supplies, especially in Punjab.

“I cannot say anything about the future. But until now even foreign investors are buying existing businesses and not investing in new Greenfield projects,” a Karachi-based banker told Dawn.

A Punjab Board of Investment and Trade (PBIT) official agreed saying most foreign investors — read Chinese — are showing more interest in the possibility of acquiring existing businesses instead of investing in new projects.

Foreign and domestic private investment has consistently been dropping in the country over the last several years due to deteriorating security conditions, energy crunch, political instability and tensions with India, affecting the economy’s ability to create new jobs. Foreign direct investment (FDI), for example, shrank 45pc to $460m from a year ago.

Even the State Bank of Pakistan has expressed its concern over falling private investment in the economy, saying higher private sector investments need to be accelerated.

“While public sector investment is increasing despite resource constraints, investment by the private sector has not increased sufficiently. This has inhibited the country’s potential growth,” the central bank said in its annual State of the Economy report for 2015/2016.

Zeeshan Afzal, a financial analyst at Insight Securities, however, expects significant foreign investment flowing into the manufacturing industry during 2017. “We cannot quantify it right now but we can see foreign direct investment returning to the country during the year.”

He said sectors like auto, cement, steel, food, etc were amongst the top contenders for foreign private investment as security improves and energy shortages reduce.

“The investment climate in the country has significantly improved. Until a couple of years ago no foreign investor was prepared to commit its money to Pakistan. The situation has changed now and we see investors coming back,” Zeeshan argued.

“They are coming to Pakistan to take advantage of our growing middle class. They aren’t investing in the export-oriented industry because our exports are uncompetitive and have a very narrow base.”
Taha Khan Javed, director research at Alfalah Securities, agreed. “After a lull of 6-7 years, FDI is picking up. Indeed, the CPEC has helped. But I think even without it our perception has improved,” he insisted.

He admitted that foreign private investors were not attracted in committing money in export-oriented industries. “They are coming to Pakistan to take advantage of our growing middle class. They aren’t investing in the export-oriented industry because our exports are uncompetitive and have a very narrow base.”

Syed Ali Ehsan, a textile manufacturer and Aptma-Punjab chairman, contended that the investment outlook for 2017 remained ‘very dull’.

“I can tell you about the textile industry, which is feeling very low and does not have enough appetite for investment in spite of low interest rates.

“The government’s failure to announce the textile package despite repeated promises and reduce cost of energy, especially in Punjab, has created uncertainty and affected business confidence,” he argued.

He said the industry was importing machinery for modernisation and expansion. “But the investment being made in the textile industry at present is just 5-10pc of what it should or would have been if the government had kept facilitated the exporters.”

Shahzad Ali Khan, a spinner and oil extractor, expects the industrial sector to shrink over the next one year and beyond unless the government takes measures to cut the cost of doing business, especially in Punjab.

“We are witnessing de-industrialisation — particularly in Punjab — because of rising costs of doing business, harassment of businesses by tax collectors, difficulties in getting utility connections for a new industry, etc.

“Therefore, people are investing their money in the services sector, retail and stock exchange.

“Which industry can give you a more than 40pc return on your investment? Why should people work hard to be penalised by the government if they can make so much money by investing in the stock exchange?” Khan said.

Published in Dawn, Business & Finance weekly, January 2nd, 2017

 

[Chichago_bulls]

From the very first guy who posted the comment on this thread, I am more than happy that Pakistan basically consider India as a benchmark for all their statistical analysis.

 

[Hyde]

I think one key reason for poor FDI is that our ministers have stopped visiting foreign nations to invite investors. They are putting all their focus on CPEC which is really stupud of them.

We need investors from our all time economic partners of United States, Japan and Europe alongside Arab World if we are to thrive our economy and maintain balance of trade. If we are continue to lease everything to Chinese it may haunt us in 15-20 years...

 

[mr.robot]

I think one key reason for poor FDI is that our ministers have stopped visiting foreign nations to invite investors. They are putting all their focus on CPEC which is really stupud of them.

We need investors from our all time economic partners of United States, Japan and Europe alongside Arab World if we are to thrive our economy and maintain balance of trade. If we are continue to lease everything to Chinese it may haunt us in 15-20 years...

Not only it is going to haunt but the dip also tells that almost all the projects in CPEC are loans. Someone from parlimentary committe on CPEC was telling that 2 Billion USD is FDI, rest is loan.